1. If a company repurchases 1,000 shares of common stock at a market price of $40 per share, which of the following is the correct balance sheet effect?
A. Decrease cash by $40,000 and decrease contributed capital by $40,000
B. Decrease cash by $40,000 and decrease earned capital by $40,000
C. Increase stock revenues by $40,000
D. Stock repurchases are not reported on the balance sheet
E. None of the above
2. On its 2010 balance sheet, Lowell Co, reports treasury stock at cost of $1,000 million. The company has a total of 1,000,000,000 shares issued and 900,000,000 shares outstanding. What average price did Lowell Co. pay for treasury shares?
A. $10.00
B. $11.11
C. $ 3.57
D. $35.73
E. None of the above